OBELA Analysis

The economic outlook during 2020 has been very adverse worldwide, with employment in the US and globally falling more since the confinement than in any other crisis. The economic circumstances are unusual for those who remain in their occupations. Approximately 93% of the world's workers have been affected in some way by full or partial shutdowns of economic activities in an attempt to contain the health crisis. 

Unemployment in the US, according to official figures from the US Department of Labor (DOL), reached 15 per cent in April 2020, up from 10 per cent during the 2008 crisis, the worst figure in recent history. 

The US economy faces a very adverse employment environment and the challenge of creating conditions conducive to economic recovery. Overall, widespread vaccination may take time, condemning the West to even more prolonged confinement, more prolonged unemployment and more impoverished living conditions.

The Latin American countries that improved the most during the third quarter of 2020 are those that will continue to grow in 2021. Economic performance is influenced by previous growth, restrictions to avoid contagion from covid-19 and fiscal and monetary policies. 

Costa Rica, Argentina, Jamaica, Ecuador and Chile had problems with large company exits, social unrest, dependence on the oil sector and tourism, making them the slowest rebounders in the third quarter of 2020. Mexico recovered a little less than half, the best performer among the least rebounding. Those that improved the most are Brazil, Nicaragua, Colombia and Peru. 

The main risks to the 2021 improvement are: the evolution of the pandemic and vaccine availability; premature withdrawal of fiscal and monetary stimulus measures; global financial conditions allowing access to cheap financing; and the upward trend in commodity prices.

The divorce between the real economy and the financial economy began when the exchange markets were liberalised in 1973, and became more pronounced from 1994 onwards. This phenomenon was intensified in 2020 by the US decline with the stock market rising. What is new about the first week of January 2021 is that the relationship between politics and rational expectations in the stock markets has also been broken. Everything points to the fact that, in the third decade of the 21st century, political instability is not synonymous with economic or financial instability, contrary to the major crises.

What does seem to be correlated is the size of the economic impact with the protests. There is no margin between economic contractions and radical protests.  This speaks of social saturation and social pressure that was built up before the pandemic in a long list of countries beyond Latin America.

The COVID crisis19 exposes the problem in employment, production and health. Usually, crises are overcome by economic theories that are different from those that induced them. This time, the only successful economic performance is that of China and its Asian neighbours.